Washington – In two of his initial executive orders, President Trump indicated he will continue to fight discriminatory taxation, which has included Digital Service Taxes that target US technology companies. In these Executive Orders, the Dept. of Treasury, Dept. of Commerce, and the Office of the U.S. Trade Representative (USTR) are directed to investigate the impact of discriminatory taxation on U.S. entities and consider an appropriate response.
Last fall, the previous administration took the first step toward opening an official dispute with Canada, asking Canadian authorities to justify its Digital Service Taxes in light of Canada’s obligations under the U.S.-Mexico-Canada Free Trade Agreement (USMCA)—specifically, rules designed to prevent discrimination against U.S. firms. In addition to pursuing action under USMCA, the Administration retained the option of pursuing action under Section 301 of the 1974 Trade Act, the approach adopted by the first Trump Administration against earlier DSTs (predominantly in Europe).
A recent CCIA Research Center study found that Canada’s DST will likely impose direct losses of up to $2.3 billion annually for U.S. companies—and, thereby, significantly undermine the U.S. tax base—and could result in thousands of full-time U.S. job losses. This would add to the billions of dollars already paid over the last several years under DSTs in Europe. If extended globally, such measures could saddle U.S. firms with payments in the tens of billions of dollars annually, and significantly erode the U.S. tax base.
The following can be attributed to CCIA Vice President of Digital Trade Jonathan McHale:
“Executive orders have put trading partners on notice that discriminatory taxes like Digital Services Taxes aimed at US companies will be investigated and challenged. Digital services taxes are inconsistent with longstanding trade principles on how companies should be treated in foreign markets, including with respect to taxation, and CCIA is glad to see this issue on the new Administration’s agenda.”
“Fighting discriminatory taxes aimed at U.S. companies is a longstanding policy enjoying bipartisan support and extending back to the first Trump administration. DSTs already extract billions from the U.S. tax base, costing U.S. businesses, workers, and taxpayers dearly. Unless strongly challenged by U.S. leaders, existing barriers in countries like the UK, France and Canada will remain unaddressed and other countries are likely to follow suit.”
